Improving service, while keeping down costs. Creating value from your support functions.
Outsourcing may be a powerful competitive weapon for organisations but it is certainly a double-edged sword. When used strategically, it has the potential to make a material impact on the performance of an organisation; when it goes wrong it can drag the organisation backwards and leave it scarred.
And that is because the implementation of these programmes is comparable to a major corporate transaction. Merger and acquisition activity will always garner a lot of attention and accountability at board level, yet outsourcing and offshoring arrangements often will not get the same level of attention from senior members of the organisation.
Painful experience has shown that, to deliver maximum benefit, the outsourcing process takes time and serious management commitment. In fact, a successful programme needs as much management time and attention as a major M&A transaction - or more.
The difference is that a major deal involves one transaction; an outsourcing arrangement is much more than a transaction, it is an ongoing relationship with an external, independent entity. Processes might be stripped out of the organisation, but the regulatory and reputational risks remain within it - and that means committing to active management for the life of the agreement.
Poor structuring or contract management between the provider and the client can often lead to relationship breakdown and result in clients wanting to pull out of their contract at great expense. So getting the right management team and governance processes in place for the life of the contract is critical for successful outsourcing.
Outsourcing cannot be treated as just another procurement programme, executed and managed by the purchasing department - the CEO or the CFO must drive these projects, or they will fail.
Getting it right means looking at the full term of the deal. We have developed an 'outsourcing lifecycle' that provides insight on every stage of the process, and the issues to address and skills required to reap the benefits of this business change.
Our experience is that those organisations getting the benefits of outsourcing do so by following the six steps of the lifecycle, starting from the initial strategic decision through the scoping and definition of requirements, selection of a service provider, transformation of the business and eventual termination or re-negotiation of the contract.
It's no surprise that even service providers are calling for advisors to provide support to organisations in the negotiation and management of these very important business relationships. Getting it right needs more than technical skills - it requires business and behavioural competencies that differ at different stages of the lifecycle.
At PricewaterhouseCoopers we can provide insight founded on experience to help organisations make smart choices in outsourcing, offshoring and shared services.